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US-China Relations

Apple Factory in Shanghai Stopped Hiring Workers

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that Shanghai Pegatron, known as Apple’s second largest foundry (after Foxconn), issued an announcement on October 15th that it would suspend recruitment. Pegatron has always been the main force in manufacturing iPhone Plus models. The reporter visited Pegatron’s Shanghai Apple factory in person, and the recruitment interview office was empty. The security guard at the factory gate explained, “The factory is not that busy right now, and recruitment has stopped.” According to sources, Apple cut 70 percent and 90 percent respectively of the orders from two of its suppliers in China. At the same time Apple asked at least one component supplier to stop production immediately. The recent sharp reduction in working hours has caused dissatisfaction among many employees, since their income has been reduced substantially and they can only get a base salary. As the largest iPhone OEM, Zhengzhou Foxconn accounts for half of the world’s iPhone assembly work. Foxconn also lowered the company’s performance forecast for the fourth quarter, due to the Zero Covid government policy. Apple has been spreading its supply chain around the world to manage risk. This year, the number of factories from the United States and South Korea increased significantly. In particular, the number of American suppliers has increased from 54 to 85.

Source: Sina, November 15, 2022

Lianhe Zaobao: Moody’s Risk Management Unit Closed its China Operations

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that Moody’s has closed the risk management unit of its China operations, thus cutting about 100 jobs. People familiar with the matter said Moody’s Analytics closed its offices in Beijing, Shanghai and Shenzhen after discussing operational efficiency and profitability. However, Moody’s credit rating business will continue. Wall Street is now grappling with China’s strict Zero Covid government policy, volatile markets and state intervention. Morningstar had cut its staff in China earlier this year too. In response to inquiries, a Moody’s spokesperson said that, as announced on the most recent earnings call, Moody’s is taking steps to align its global workforce with current and anticipated economic conditions. Moody’s continues to maintain a strong presence in China and make constructive contributions to China’s sustainable growth and the further development of the Chinese domestic market. As a rating agency, Moody’s said Beijing’s support for its domestic real estate sector is not enough to eliminate the pessimistic outlook.

Source: Lianhe Zaobao, November 18, 2022

China Times: US Blocked Import of a Large Quantity of Chinese Solar Modules

Major Taiwanese news network China Times recently reported that, according to some U.S. federal customs officials and industry sources, since June, more than 1,000 shipments of solar modules worth hundreds of millions of dollars have been blocked and are piling up at U.S. ports. The blockage was implemented under a new law that bans imports of products from China’s Xinjiang region based on concerns about slave labor. The high number of seizures suggests the policy, aimed at pressuring Beijing over Uyghur concentration camps in Xinjiang, may even slow the Biden administration’s drive to decarbonize the U.S. power sector in response to climate change. U.S. Customs and Border Protection (CBP) confirmed that none of these shipments have yet been returned. Based on federal laws that protect trade secrets, CBP will not disclose the manufacturer or provide details about the number of solar devices. However, three industry sources revealed that the seized products included solar panels and polycrystalline silicon solar cells, which could generate up to 1GW of electricity. The three Chinese manufacturers involved typically account for one-third of the U.S. solar panel supply. Industry sources said the companies have suspended shipments to the U.S. amid fears of more shipments being held up. According to a survey conducted by the American Clean Energy Association, solar installations in the United States plummeted by 23 percent in the third quarter and nearly 23GW of solar projects have been delayed, mainly because of the lack of access to solar panels.

Source: China Times, November 11, 2022

Lianhe Zaobao: U.S. Plans to Ban All Huawei and ZTE Equipment from New U.S. Sales

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that an internal document revealed the U.S. Federal Communications Commission (FCC) plans to ban approval of new U.S. communications equipment using products from Chinese communications equipment companies Huawei and ZTE. The report cited national security grounds. FCC Chair Jessica Rosenworcel issued the proposed ban to three other commissioners last week for final approval. The ban stipulates that neither Huawei nor ZTE can sell new equipment in the United States without authorization from the U.S. government. Rosenworcel said in a statement that the FCC remains committed to protecting national security by ensuring untrustworthy communications equipment is not authorized for use within the United States. This is the first time the US FCC has banned the sale of electronic devices on national security grounds. The FCC had earlier banned U.S. companies from using federal funds to buy equipment from those companies, but the new order will extend that ban to all purchases. The FCC rules would also explicitly prohibit the sale of video surveillance equipment for public safety in the United States. This will affect U.S. sales by Chinese companies Hydra Communications, Hangzhou Hikvision and Dahua Technology. However, the rule is not retroactive, meaning U.S. companies can still sell FCC-approved Chinese communications equipment. The Chinese embassy in the U.S. earlier this year criticized the FCC for “abusing state power” and again for “maliciously attacking” Chinese telecom operators without a factual basis.

Source: Lianhe Zaobao, October 14, 2022

Apple Suspended Adoption of Chinese Flash Memory Chips

Well-known Chinese news site NetEase (NASDAQ: NTES) recently reported that Apple appears to have suspended plans to use YMTC (Yangtze Memory Technologies Co., Ltd.) flash memory chips in its products. Apple had previously confirmed that it was testing NAND Flash chips imported from China’s YMTC in iPhones. Apple’s decision came after the U.S. government imposed a new round of export controls on Mainland China’s tech industry on October 7. Multiple sources said Apple had completed a months-long certification for longevity before the U.S. government announced it would impose stricter export restrictions. Earlier, Apple noted that it did not consider the use of Yangtze memory chips in phones sold outside of China, and said all user data stored on the flash memory chips used by the company was “fully encrypted.” At present, YMTC is the largest domestic NAND Flash supplier in China, and its mass-produced 128-layer NAND Flash chips are also China’s most advanced NAND Flash chips. Apple initially planned to use YMTC NAND Flash chips starting this year because its chips are at least 20 percent cheaper than those from other major rivals, A source from a top supply chain executive said that the reason for Apple’s suspension of the plan to adopt YMTC chips this time was that YMTC actively proposed to Apple to “exit Apple’s supply chain.” It is because it does not want to continue to stimulate the sensitive nerves of the United States at this sensitive time.

Source: NetEase, October 17, 2022

Global Times Accused the U.S. of Four Major Sins in Manipulating Cyber Hegemony

China’s state-run media Global Times published an article recently accusing the U.S. of dominating cyberspace and launching cyber attacks. The article said,“In June 2022, Northwestern Polytechnical University issued a ‘Public Statement’ claiming that it had suffered a cyber attack from overseas. In September, it was found that a cyber attack against Northwestern Polytechnical University came from the National Security Agency (NSA) Specific Intrusion Operations Office (TAO). The cyber hegemony by the United States originated in cyberspace, covered the world, and spread to the whole globe. Its cyber attacks have long been systematic. The cyberspace seems peaceful. However, on the other end of the Internet, there are countless ‘tentacles’ of the United States waiting to seize secrets. The United States has been manipulating cyber hegemony and creating troubles.”

The article enumerated “four major sins” by the U.S. in manipulating cyber hegemony.

1. The United States has established a large and professional cybersecurity intelligence agency to pave the way for cyber intrusions.

”On September 5, 2022, the ‘Investigation Report on the Discovery of NSA Cyber Attacks by Northwestern Polytechnical University (Part 1)’ jointly issued by the National Computer Virus Emergency Response Center of China and 360 Companies mentioned that the NSA’s subsidiary The Specific Intrusion Operations Office (TAO) was behind the cyberattacks on China’s Northwestern Polytechnical University. “

“The TAO, composed of more than 2,000 military and civilian personnel, is recognized as the cyber warfare force with the highest level of combat in the world.”

2. The United States conducts cyber attacks on other countries and steals secrets from other countries.

“In recent years, the TAO has launched tens of thousands of network attacks on China, controlling tens of thousands of network servers, Internet terminals, network switches, telephone switches, routers, firewalls, and more, and has stolen no less than 140GB of information and data.”

3. By combining public opinion hegemony with cyber hegemony, the United States creates a protective shell for its cyber attacks.

4. The United States tramples on the cyber sovereignty of other countries and arbitrarily infringes upon the Internet human rights of other countries’ citizens.

Source: Global Times, September 29, 2022

U.S. Department of Defense Blacklisted DJI and BGI for Investment

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that, according to the U.S. Department of Defense’s (DOD’s) official website, the DOD is determined to identify and counter China’s “Military-Civilian Integration” strategy. This strategy is based on Chinese companies, universities and research programs that appear to be civilian institutions. Advanced technologies and expertise owned and developed by these agencies will in the meantime support the Chinese military’s modernization goals. Contributors to the Military-Civilian Integration strategy operate directly or indirectly within the United States. The U.S. Department of Defense will continue to update this blacklist. The list announced last June included Huawei and Hikvision. The new list just released has a total of 13 companies, including DJI and BGI. Basically, those blacklisted by the U.S. Department of Defense are China’s leading high-tech companies or colleges with strong influence. According to public information, DJI is headquartered in Shenzhen, China. As of October 2020, DJI had a market share of over 80 percent in the global civilian and commercial drone market, ranking first among all commercial drone companies. BGI was established in 1999 and also headquartered in Shenzhen, China. The company provides research services and comprehensive solutions for precision medical testing for medical institutions, scientific research institutions, and social health organizations through genetic testing, mass spectrometry testing, and bioinformatics analysis.

Source: Lianhe Zaobao, October 7, 2022

U.S. Announced New Controls over Chips and Chip-making Equipment

Well-known Chinese news site NetEase (NASDAQ: NTES) recently reported that, on October 7, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced new export controls over chips. New export control measures restrict U.S. companies from selling certain advanced chips and manufacturing equipment to Chinese manufacturers. Also, the BIS increased export licensing requirements for technologies that China can use in supercomputing and semiconductor development. This may be the biggest change in U.S. policy on exporting technology to China since the 1990s. If implemented, U.S. technology and chip manufacturing will no longer be able to support China, which will set China’s chip manufacturing industry back by several years. The BIS stipulates that if U.S. manufacturers want to export equipment that can make DRAM of 18 nanometers or below, NAND Flash of 128 layers or above, or logic chips below 14 nanometers to local Chinese manufacturers, they must apply for export licenses. The Commerce Department said the move would protect U.S. national security and foreign policy interests. A senior official at the ministry said that concerted action is still in discussions with allies. For Its own self interest, Americans have not hesitated to use the laws of fair trade, or suppress and contain the development of technology companies in other countries.  They have reached that point.

Source: NetEase, October 8, 2022